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The Health Care Reform Spectrum CHRO Education Series

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The Health Care Reform Spectrum CHRO Education Series I II III IV V VI I. II. I. Nearly a decade after the passage of the Affordable Care Act, health care continues to be a top issue among voters in the U.S., with the two major parties offering distinctly III. different visions of the direction of future reform. To help CHROs, their teams, stakeholders, and the public better understand the health care landscape and the prospects for change, we’re launching a series of short papers that will discuss the IV. various types of reform proposals being discussed among policy makers, political candidates and other key stakeholders. OBJECTIVES V. OF THE SERIES We hope this CHRO Education Series will VI. increase member awareness of the spectrum of potential future health care reforms that may be proposed over the next two years – and will help senior HR leaders assess the implications of various types of reform on their future business and talent strategies. We will also use these papers as the basis for follow up discussions with members in 2019 that will help shape the Association’s work with policymakers. 1 II. Policy Makers Have It’s also not surprising that Democrats and Differing Visions of Republicans have very different visions of what direction health care reform should Health Care Reform take in the future. While Republicans have largely abandoned prior calls to “repeal and The US health care system is unique among replace” the Affordable Care Act (ACA), industrialized nations in two ways: it does the Trump Administration declined to not provide universal coverage for all defend the ACA in a recent challenge in a citizens, and access to coverage for nearly Texas district court. Instead, the half is linked to employment. While most Administration has focused its efforts on large employers remain committed to taking actions to increase choice and offering health care coverage, the growth of competition and reduce benefit mandates non-traditional employment relationships in and drug prices. For example, expanding the “gig economy” call into question the access to short-term plans that do not meet continued viability of a model based the ACA’s minimum benefit requirements primarily on access through traditional and reducing the penalty for the individual employment. mandate have increased consumer choice for The US system is also expensive and those who can’t afford expensive ACA complex. Health care spending represents plans. Overall, Republicans seek a future one-fifth of GDP, and the sector creates that encourages free market competition, more jobs than any other; but the complexity discourages government mandates, favors and waste in the system are significant individual choice, and gives more flexibility contributors to high and seemingly and control to the states. unsustainable costs. And while the US is often praised for the quality of care available Texas v. Azar to its citizens, health outcomes for Americans fall short of those of other In December 2018, a Texas federal industrialized nations. district court judge held that the ACA is unconstitutional. However, the judge In light of the above, it’s not surprising that health care remains one of the country’s stayed the decision pending appeal, so most significant public policy issues. During the ruling will not have an immediate the 2018 midterm elections, health care was impact for employers. Despite the stay, one of the top three issues among voters and the ruling has turned up the political it is shaping up to be a major issue in the heat on health care reform. 2020 election. You can read more about the case in our Brief here. CHRO Education Series For Democrats, “Medicare for All” is Understanding emerging as a rallying cry for many - but there are significant differences between the Reform Proposals: The moderate and progressive elements of the Role of Government party as to what, exactly, such a plan would include. Some believe the only viable The health care industry is one of the most solution to the nation’s health care crisis is a highly regulated in the US economy, with complete replacement of the current system government playing a significant role in with a government funded and controlled virtually all aspects of how products and single-payer approach. Others, aware of the services are delivered. At the core of the fact that nearly half of Americans have national debate on health care reform is the employer-based coverage and are happy question of who should pay. with it, are advocating a “public option” approach, preserving employer-based plans, To help explain and evaluate proposals to increasing subsidies in the individual market reform how health care is financed, we’ve and allowing those without coverage to focused on understanding the role “buy-in” to a government program (such as government plays in how health insurance is Medicare). designed, purchased and consumed. While This second installment in our series this model is not meant to be an all-inclusive presents a conceptual framework within description of the many ways in which which we can understand and evaluate government impacts health insurance, we proposals that are now (or will likely be) hope it explains the current landscape and part of the coming discussions on health facilitates a better understanding of care reform among policy makers, think proposals for change. The framework is tanks and other stakeholders. presented in Figure 1. Our framework describes four major ways government plays a role in the market for health insurance. Part Two of Six 3 American Health Policy Institute 1. Government 2. Government provides financial provides health incentives for the insurance directly purchase of private to select health insurance populations Today, government plays a significant role Veterans and the Military by providing financial incentives that The federal government has provided health encourage the private sector to provide care coverage for veterans since the early health care coverage and individuals to days of the republic, and it remains a purchase it. The primary way this is priority today. For 2019, Congress has accomplished is through tax policy – approved a $50 billion for the Veterans specifically, the tax exclusion of employer Health Administration.iii Members of the contributions to health care insurance. This armed forces and their dependents receive exclusion is the single largest under the tax coverage under the government-run code; according to the Joint Committee on TRICARE and VA programs, which cover Taxation, it cost the federal government almost 5% of Americans.iv In 2017, i $336.9 billion in 2018. taxpayers paid $114 billion in active duty and veterans’ health care.v Employers can provide tax-based financial incentives for employees to participate in Elderly and Disabled Americans their health care plans by allowing employee With the creation of Medicare in 1965, the contributions to be made on a pre-tax basis; federal government expanded its footprint of and by offering various forms of health health care coverage to a large population – savings accounts that allow for the payment the elderly and disabled Americans. of medical expenses with pre-tax dollars. Medicare provides health care coverage to The government also provides financial citizens age 65 and older, and to younger people who have become disabled. Medicare incentives for the purchase of private vi insurance to certain lower income today covers over 17% of Americans. Americans. Under the ACA, low income Americans who do not qualify for Medicare Low Income Americans and or Medicaid (discussed below) can qualify Children for subsidies to purchase private insurance Created in 1965 along with Medicare, coverage on the public exchanges. These Medicaid is a federal-state partnership that subsidies cost the federal government $49 provides coverage to low income billion in 2018.ii Americans. Medicaid is funded by both the federal and state governments and administered by the states. Eligibility for Medicaid was expanded significantly under the ACA, with the federal government covering the initial cost of the expansion. 4 The Health Care Reform Spectrum CHRO Education Series Following a 2012 Supreme Court ruling that covered by the plan, which offers employees allowed states to opt out of the ACA a choice of a range of private insurance Medicaid expansion, several states declined plans from multiple insurance carriers.x to expand coverage. In the 2018 midterm elections, voters in three states (Utah, Nebraska and Idaho) passed ballot measures in favor of Medicaid expansion, bringing the total number of states to 37 (including the 3. Government District of Columbia). Today, 19% of vii influences the Americans are covered by Medicaid. supply and demand for health Almost 38% of Americans receive health insurance insurance provided directly by the government ix Government can influence the private market for health insurance by actions that Four states – Arkansas, Indiana, Kentucky impact the supply of and demand for and New Hampshire – have received coverage. The primary means of doing this approval from the federal government for is through regulation. “work requirement demonstration projects.” Two notable examples of government These initiatives require Medicaid regulation that impact supply and demand beneficiaries to work or be engaged in work- for health insurance are two provisions of related activities in order to be eligible for the ACA: the requirement that every coverage. Several other states are American have health care coverage (the considering implementing these types of “individual mandate”); and the requirement eligibility requirements. that employers with more than 50 employees offer coverage that meets minimum Children whose families do not have health standards (the “employer mandate”). insurance and who do not qualify for Medicaid are covered by the Children’s Health Insurance Program, or CHIP. The Individual Mandate Established in 1997, CHIP is funded by the Under the ACA, the individual mandate federal government, and designed and requires most citizens and legal residents administered by each state.
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